Not as bad as it sounds?

Though affordability in Southern California looks bleak, the way the numbers are reported may contribute to creating such a dismal picture.

The California Assn. of Realtors bases its affordability index on purchasing a home using a fixed-rate mortgage and assuming a 20% down payment and a qualifying income-to-debt ratio of 30%. Although nearly 60% of first-time home buyer mortgages in California were of the fixed-rate variety in 2004, a growing number -- more than a third in 2004 -- were adjustable rate loans, up 21.6% from a year ago.

Taking that into consideration, experts such as Delores Conway of USC’s Lusk Center for Real Estate believe a more accurate look at how many can afford a home can be determined using adjustable-rate mortgages and a more lenient, higher income-to-debt ratio of 35%. Based on that criteria, Conway calculates that about 23% of those living in Orange County in October, for example, could afford a median-priced home, compared with the California Assn. of Realtors’ projection of 13%.

“This ... may better reflect what is going on in the market,” Conway said, “because lenders are adopting more flexible criteria in granting loans in California.” But even using these more liberal calculations, “we can still see affordability is an issue.”

-- Allison B. Cohen

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November affordability index

The percentage of households earning enough to buy a median-priced, existing single-family home.

Median Afford- Afford- home Min. Monthly ability ability County price income payment* index a yr. ago

Los Angeles $474,570 $109,971 $2,749 17% 23% Orange 633,340 146,763 3,669 13 18 San Diego 564,830 130,887 3,272 12 16 Riverside 344,414 79,811 1,995 18 31 San Bernardino 286,041 66,284 1,657 27 43 Ventura 595,910 138,089 3,452 17 25**

*Based on a 30-year mortgage with an average rate of 5.7% and 20% down payment, includes principle, interest, taxes and insurance. **Revised Source: California Assn. of Realtors